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Comments on the President’s Health Care Proposal

The President’s proposal would change the Senate-passed bill by:

Modifying the Employer Free Rider Assessment (Partial Mandate): Would charge employers with more than 50 employees who do not offer coverage comprehensive enough to meet governmental standards for each full-time employee qualifying for federal tax credits for exchange coverage $3,000 instead of $750 and $2,000 per full-time employee for employers who do not offer coverage—the first 30 workers would be exempt from the calculation. LIKELY IMPACT WILL BE A FINANCIAL CALCULATION BY EMPLOYERS ON WHETHER TO OFFER COVERAGE OR OPT OUT. AT RISK: THOSE CURRENTLY OFFERING COVERAGE AND PAYING MORE THAN THE THRESHOLD.

Increasing the “Cadillac” Tax Thresholds: Would include the union modifications to raise the thresholds for the 40% excise tax on the aggregate value of employer-sponsored health coverage, beginning in 2018, from $8,500 to $10,200 for individuals and from $23,000 to $27,500 for family coverage, indexed annually to general inflation, not medical inflation, plus 1%. The proposal would still adjust the thresholds higher if insurance costs grow faster than expected, for certain high-risk occupations, firms whose health costs are higher due to the age and gender of their employees, and would not count dental and vision benefits as taxable. LIKELY IMPACT WOULD BE FOR EMPLOYERS TO CONTINUALLY REDUCE THE BENEFITS PACKAGE TO STAY BELOW THE TAX THRESHOLD. AT RISK: EMPLOYERS WILL REDUCE THE COVERGE AND THEREBY SHIFT THE COST OF HEALTH CARE TO PLAN PARTICIPANTS.

Limiting Waiting Periods to 90 days: Would remove the earlier penalty for employers with health care coverage waiting periods of more than 60 days, but would limit waiting periods to 90 days. LIKELY IMPACT IS FOR EMPLOYERS TO WHO HAVE LONGER WAITING PERIODS TO SHORTEN THEM. AT RISK: POTENTIAL FOR SOME EMPLOYERS TO LENGTHEN WAITING PERIODS TO THE GOVERNMENT AUTHORIZED LIMIT. ADDITIONALLY, MAY INCREASE THE COST TO SOME EMPLOYERS INCLUDING THOSE WITH HIGH TURNOVER AND RESULT IN FEWER WORKERS BEING HIRED.

Delaying Taxing Employers’ Retiree Drug Subsidy (RDS): Would delay prohibiting employers with retiree prescription drug plans from excluding the Medicare Retiree Drug Subsidy (RDS) from gross incomes for corporate income tax purposes until 2012. LIKELY IMPACT WILL BE ONE MORE YEAR OF EMPLOYER SPONSORSHIP OF THESE PLANS FOR THEIR RETIREES. AT RISK: WITHOUT THE SUBSIDY EMPLOYERS WILL END THEIR SPONSORSHIP OF RETIREE DRUG PLANS AND PERHAPS RETIREE MEDICAL ALTOGETHER.

Applying Insurance Reforms to Employer-Sponsored Plans: Would require employer-sponsored plans to cover dependents up to age 26 on their parents’ plans LIKELY IMPACT IS THAT IT WILL MAKE PLANS MORE EXPENSIVE. EMPLOYERS WILL SHIFT MORE COST TO EMPLOYEES; prohibit dropping coverage and require all plans to implement internal appeals processes for coverage determinations and claims—self-insured plans would have to use an external review process established or approved by the HHS Secretary. LIKELY IMPACT IS THAT IT INCREASES THE COST OF PLANS. PLANS THAT CURRENTLY SHIFT CLAIMS FIDUCIARY LIABILITY TO THEIR ASO CARRIER PAY APPROXIMATLEY 1% INCREMENTAL ASO FEES. After state-based exchanges start in 2014, it would prohibit annual and lifetime limits, ban pre-existing condition exclusions (medical history, genetic information or evidence of domestic violence) and prohibit setting different premiums based on gender, salary or age. LIKELY IMPACT IS THAT WITHOUT AN INDIVIDUAL MANDATE COST WILL SPIRAL. ALSO DISALLOWING PREMIUM DIFFERENTIALS MEANS THAT INDIVIDUALS WILL NOT BE RESPONSIBLE FOR THEIR OWN LIFESTYLE CHOICES. IT ELIMINATES MONETARY INCENTIVES TO MAKE THE RIGHT DIET, EXERCISE AND BEHAVIOR CHOICES. In 2018, it would require all plans to cover proven preventive services with no cost sharing. LIKELY IMPACT IS THAT THIS INCREASES COSTS SIGNIFICANTLY FOR ALL PLAN SPONSORS. IT WILL CAUSE MORE COST TO BE PASSED ON TO PLAN PARTICIPANTS.

Delaying Insurers’ Fees: Would delay implementation of a $67 billion assessment on health insurers over 10 years until 2014. The fee would begin at $2 billion annually in 2014, increase to $4 billion in 2015, $7 billion in 2016, $9 billion for years 2017 through 2018 and $10 billion for years after 2018. WITHOUT REAL INCENTIVES TO KEEP COSTS DOWN, THESE ARE TAXES THAT GET PASSED TO PURCHASERS.

Increasing Pharmaceutical Companies’ Fees: Would increase the total amount collected from an annual fee on pharmaceutical manufacturing based on market share, beginning in 2011, from $23 billion to $33 billion over 10 years. WITHOUT REAL INCENTIVES TO KEEP COSTS DOWN, THESE ARE TAXES THAT GET PASSED TO PURCHASERS.

Creating a New Federal Board to Evaluate Individual Market Premium Increases: Would establish a new seven-member federal Health Insurance Rate Authority to help States determine if a rate increase is unreasonable and unjustified and could require health insurers to lower premiums, provide rebates, or take other actions to make premiums affordable. IF THIS IS MANAGED AS PHYSICIAN REIMBURSEMENTS, IT WILL BECOME POLITICAL AND THE WILL TO KEEP THESE UNDER CONTROL WILL BE MISSING. IF NEEDED INCREASES ARE NOT ALLOWED IT IS LIKELY THAT INSURERS WILL DISAPPEAR FROM THE MARKET OR FIND THEMSELVES WITHOUT NECESSARY RESERVES. AT SOME POINT PERHAPS REQUIRING A GOVERNMENT BAILOUT.

Changing Requirements for Medicare Advantage Cuts: Would replace the proposals establishing competitive bidding and lowering payments to local fee-for-service rates with a set of benchmark payments for quality and enrollee satisfaction set at different percentages of the current average fee-for-service costs in an area. It would also revise and implement risk-adjustment for payment purposes. IT IS ALL IN THE DETAILS…ANY CHANGES TO MEDICARE ADVANTAGE, IT IS LIKELY THAT SENIORS WILL BE MADE EXTREMELY UNCOMFORABLE AND FEAR THE WORST.

Modifying a New Voluntary Retirement Program: While the plan offers no specifics, it would make a series of changes to improve the financial stability of a new national voluntary disability benefit program that employers would automatically enroll employees in (employees could opt-out) and the federal government would deduct premiums ($65 per month, possibly more, or as little as $5 for low-incomes) from employees’ paychecks that would pay $50 per day after year 5 to purchase nonmedical services and support independence at home or in community residential settings. $50/DAY, REALLY? HAVE YOU SEEN THE COST OF IN HOME HELP WHEN SOMEONE IS DISABLED?

Lowering the Individual Coverage Mandate Penalty: Would decrease the penalty for not acquiring coverage from $495 to $325 in 2015 and from $750 to $695 in 2016, or up to 2.5% of income. THIS LINKS TO NOT ALLOWING FOR RATING BASED ON AGE, SEX, CONDITIONS AND SO FORTH. IT MAKES IT EVEN MORE LIKELY THE HEALTHY WILL OPT OUT CAUSING COSTS TO SPIRAL HIGHER.

Closing the “Doughnut” Hole in Medicare Part D Coverage: Would offer a $250 rebate to Medicare beneficiaries who hit the doughnut hole in 2010 and completely phase it out by 2020 so that coinsurance is the standard 25% throughout the coverage gap. THE MONEY HAS TO COME FROM SOMEWHERE. THIS WILL JUST CAUSE COSTS TO BE SHIFTED TO A DIFFERENT SET OF CONSUMERS.

Ending Pay-to-Delay Generic Drug Agreements: Would allow the Federal Trade Commission (FTC) to prohibit settlement agreements in which brand-name drug companies pay generic competitors to stay out of the market. HERE IS ONE WE SHOULD ALL AGREE TO.